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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

When planning the audit of Orion Logistics Co, the audit manager proposes using analytical procedures as risk assessment procedures. Which statement is correct under ISA 315 and ISA 520?

Analytical procedures are required as risk assessment procedures at planning under ISA 315. They can highlight unusual transactions, ratios or trends that indicate risks of material misstatement. They do not remove the need for further substantive procedures and may use financial and non-financial data.

  1. AAnalytical procedures are not permitted at planning because ISA 520 covers only substantive and final review stages
  2. BAnalytical procedures at planning are required, and they may identify unusual transactions or trends that indicate risks of material misstatementCorrect
  3. CAnalytical procedures at planning provide sufficient evidence to eliminate all further substantive testing of the related balances
  4. DAnalytical procedures at planning must use only non-financial data

Explanation

ISA 315 requires analytical procedures as a risk assessment procedure, and they may identify unusual transactions, events, amounts, ratios and trends that indicate matters with audit implications. They do not by themselves eliminate substantive work, and they can use financial and non-financial data.

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